Employee pension payments are set to rise under Government plans to ease the strain on Bermuda?s pension system.

Finance Minister Paula Cox also revealed businesses and unions were being consulted on plans to increase the age of retirement.

Ms Cox said the slight increase in pension contributions would help combat long-term effects of population changes that threaten the solvency of the Contributory Pension Fund.

Announcing the new policy at the House of Assembly yesterday, she said: ?Currently benefit rates are increased broadly in line with prices, and contribution rates increased at the slightly higher rate of 1.25 per cent a year more than benefits.

?To further improve the long-term financial position of the fund...contributions will be now increased by about 1.75 per cent a year more than benefit increases.?

She said Bermuda, like the rest of the developed world, faced financial challenges linked to looking after an increasingly ageing population.

Ms Cox revealed the results of a review of the contributory state pension fund ? paid out to seniors and funded by workers ? as it stood in August 2002.

It showed the number of workers in the 20 to 64 age range were expected to drop from nearly 40,000 to about 32,000 between 2002 and 2042, due to a lower birth rate.

In contrast, the report states the number of people picking up pensions in the same period was expected to nearly double to 15,000.

She said these figures meant it was vital Government prepared early, and she told how it had ?considered? increasing the retirement age.

?Employers and representative organisations have already been consulted on this important initiative,? she explained in the House of Assembly.

The Finance Minister said the contributory pension scheme played an important role for residents ? providing a first tier or basic pension to more than 8,700 seniors. The maximum benefit payment is currently about $1,061 a month, she added.

Ms Cox said the short term outlook of the fund was ?positive? and continued to get stronger.

The market valuation at the end of September was just over $1 billion ? roughly 13 times more than the annual projected payout of some $75 million in pensions and allowances.

This compared well to the United States, which held about three times the annual pension outflow.

She also said a 2003 pensions review by the UK Government concluded there were no major concerns about pension arrangements in Bermuda.

But she said this did not mean Government would get complacent and the pension fund would continue to be monitored.

She also stressed the financial projections for future years in the report should not be treated as concrete forecasts.